Serves the Commercial Small Fleet Market of 10 – 50 Vehicles

Managing Metrics to Cut Fleet Costs

July 2014, by Travis Mjolsnes

Photo via iStockphoto.com/RidoFranz
Photo via iStockphoto.com/RidoFranz

Small business owners constantly find themselves wearing many different hats throughout the course of a day — all in the name of maximizing efficiency and increasing profitability.

Yet for many business owners, the fleet is often an afterthought — a mere line item within an operating expenses budget. Within a small business, the fleet management role is typically assigned as an employee’s secondary job or just another task for the human resources department to handle.

And with many other tasks requiring the full attention of a small staff, it’s no surprise that fleet management typically falls to the bottom of the to-do list.

However, proper fleet management can cut fleet-related costs for small businesses. Whether completed internally or via a partnership with a fleet management company, simple tasks such as minimizing depreciation, streamlining fuel spending and managing maintenance costs are important cost-savings opportunities.

A Depreciating Asset

“I’m going to run it until the wheels fall off.” It’s a phrase often heard when a small business owner discusses a company-operated vehicle, but it can have severe consequences.

Without properly maintaining fleet vehicles and accounting for necessary expenses, small businesses can end up spending nearly double the vehicle’s purchase price on maintenance costs and simple depreciation.

Depreciation isn’t thought about often, but it is one of the largest expenses in a company’s total fleet spend — about 40% regardless of whether vehicles are owned or leased. Therefore, it’s important for small businesses to operate their vehicles as efficiently as possible to maximize their return on investment.

Fleet management professionals should begin by evaluating a vehicle’s total lifecycle costs. The IRS has set a standard mileage rate of 56 cents per mile, which has been determined as the fixed and variable cost of operating an automobile for business purposes.

A fleet management company can help businesses achieve operating costs significantly lower than that — simply by identifying the appropriate make and model for their business needs or by determining that leasing might be a better option than owning.

In that case, business owners might find that a more realistic target for total lifecycle costs is as low as 38 to 42 cents — up to 33% lower in costs.

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  1. 1. Michael Roe [ July 31, 2014 @ 10:50AM ]

    Travis, that was an excellent article.Especially your explanation on the advantages of an actual fuel management card system. Thanks!

  2. 2. Tom Hoster [ December 13, 2014 @ 03:01PM ]

    Unfortunately, the article only considers doing the same things you have always done, only doing them a little bit better. To truly improve fleet efficiency, you need to apply the latest technology, such as the fleet management solution from Local Motion. Want to really save money? How about reducing the size of the fleet by 30%! Don't think that technology can be applied to make capital-intensive and labor-intensive operations like fleets more efficient? Think Zipcar. Think Uber. Think airbnb.

 

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